TODAY’S STUDY: GREAT LAKES OFFSHORE WIND IN ONTARIO

(Note: All along the Eastern Seaboard and across the Great Lakes, a brand new energy sector is being born. As detailed in the study below, the offshore wind industry will -- by the end of this decade -- be generating massive amounts of safe, domestically-sourced, emissions-free electricity. It will bring revenues to the localities that back it and build it and provide high-quality jobs across the value chain from the planning, design, engineering and manufacturing of the new energy infrastructure to the installing, maintaining and servicing of it. Major financial players ranging from the IT sector to the heavy manufacturing sector are buying in. Only those with no sense of the future coming on full-speed ahead are resisting.)

Employment and Economic Impacts of Ontario’s Future Offshore Wind Power Industry

Ontario has made a long-standing commitment to renewable electricity. Part of this commitment is reducing the energy generated from coalfired power to zero as quickly as possible. Through a range of initiatives, including the Renewable Energy Standard Offer Program, Ontario has added more than 1,200 megawatts of renewable generation capacity since 2003, an investment of $4 billion. The most recent and ambitious initiative is the Green Energy and Green Economy Act of 2009. This legislation created the Feed-In Tariff (FIT) program, which offers long-term contracts at predetermined prices for renewable electricity generated from qualifying projects.

Offshore wind farms represent a potential emerging industry for Ontario. The strong government commitment through the FIT program has generated interest on the part of project developers, equipment suppliers, and support companies around the world, and has made Ontario a priority market for many companies. Moreover, the Great Lakes represent a high-quality wind resource that is available to both Canada and the United States. Offshore wind has location advantages in that it does not require agricultural land and generates more power per farm surface area than onshore wind. Although the resource potential of offshore wind in Ontario alone has been estimated at 35,000 MW, there are currently no offshore wind farms in operation or under construction in North America. In Ontario, several large-scale potential projects are under development, making the province a leader in offshore wind in this continent. This research quantifies the potential economic benefits of Ontario’s offshore wind development based on our best estimate of what the future of offshore wind development holds.

The Trillium and Windstream projects—two projects currently under consideration— could provide 744 MW of increased capacity. While this is a relatively small amount in comparison with the resource potential that exists, the supply potential for offshore wind will depend critically on the pace at which specialized construction, manufacturing, assembly, and staging facilities can be developed. In addition, the ability of the power grid to accept new large-scale wind projects provides another limiting factor. For the purposes of our long-term economic impact assessment, capital investment and operations costs associated with the Trillium and Windstream projects were compiled, together with the investment and operations costs for five other potential projects that would lift total offshore wind capacity to 2,000 MW. While it is early in the history of offshore wind in Ontario to provide an accurate estimate, conservative assumptions support the development of 2,000 MW of potential between 2010 and 2026. Indeed, a more rapid pace of development is possible as experience with offshore wind in Ontario grows and the ability to integrate renewable energy into the power grid is improved.

Although there is uncertainty as to the specific timing of start-up and completion of these projects, especially those occurring in the latter years of the analysis, the methodology does allow us to draw solid conclusions about the potential impact, size, and growth of this industry over the long-term forecast horizon.

Should development progress as expected, new industries will likely develop in the province to service the needs of a growing wind power sector, although a good portion of the inputs required will be sourced from outside the province. Therefore, two scenarios were developed to account for the potential for increased Ontario sourcing. The first scenario, or base case local content scenario, is based on the assumption that about 55 per cent of the total development costs will be sourced locally. The second scenario, or high local content scenario, sees this share increased to just over 63 per cent. The two scenarios are based on different assumptions about the wind farm components that might be produced locally. The base case local content scenario reflects current supply chain capacity as well as expansion opportunities identified through interviews.

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The economic impact analysis quantifies the combined direct, indirect, and induced economic impacts on a wide range of economic indicators, including real gross domestic product, employment, income, and government revenues. The capital investment and operations spending generated by the development of offshore wind would stimulate economic activity in Ontario through a spreading out of demand for goods and services. Demand for a specific industry’s products will not only have direct impacts on the economy but will also spread through the economy via a series of multiplier effects. The overall economic multiplier is calculated as the sum of impacts divided by the initial constant dollar spending attributed to the industry’s investment and operations spending.

Over 2013 to 2026, a cumulative total of $10.044 billion in real capital investment and operations spending would be generated by the development of Ontario’s offshore wind industry. Under the base case local content scenario, real GDP would be boosted by a cumulative $4.8 billion, while the high local content scenario would see real GDP boosted by $5.6 billion. This implies that on average, for each $1 of real capital investment and operations spending generated by the offshore wind industry, real GDP in Ontario would be lifted by roughly $0.48 to $0.55.

Similarly, between 55,000 and 62,000 person-years of employment would be generated over 2013 to 2026, depending on how much of the wind farm components are produced locally. Higher labour income and corporate profits will result in a boost to both federal and provincial government revenues. In current dollar terms, activities generated by the development of offshore wind over 2013 to 2026 would allow the federal and provincial governments to generate a cumulative $1.03 billion to $1.16 billion in federal and personal income taxes and indirect taxes. Corporate income taxes are not included in the Conference Board’s provincial model but would result in additional revenues for both levels of government.

Locally sourced capital investment in machinery and engineering construction suggests that, on an industry basis, the lion’s share of output gains would accrue to manufacturing and construction sectors. On a cumulative basis, manufacturing employment would account for 20 per cent of the job gains in the high local content scenario as compared with 17 per cent in the base case. Transportation services would also receive a boost from local, interprovincial, and international procurement of goods. Induced effects, such as the lift to consumer spending generated by increased employment, would be more broadly felt, lifting activity in wholesale and retail trade as well as other goods and services sectors.

The economic multiplier associated with the operations and maintenance portion of offshore wind turbines is much stronger because the services are rendered locally, largely in wages and salaries. On average, for each inflation-adjusted dollar spent on operations, about $1.54 would be added to real GDP, although operation expenditures would be overshadowed by the size of capital expenditures in both scenarios. Still, growing installed capacity implies that employment attributed to operations and maintenance will gain over time.

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Introduction

Electricity generation in Ontario is undergoing a transition away from generation sources that emit high levels of pollutants, including greenhouse gases, toward higher reliance on low-emitting sources, including renewable energy. This transition began decades ago with the construction of nuclear generating stations, and continued with an increased reliance on natural gas generation in an effort to reduce coal-fired electricity generation. Although the more recent Renewable Energy Standard Offer Program and Feed-in Tariff (FIT) program have increased renewable generation capacity, Ontario still has not met its longstanding objective of eliminating electricity generated from coal. In addition, both generation and transmission infrastructure are aging, with significant capital investments required to meet the electricity requirements of a growing provincial economy.

The Government of Canada has also set a target that by 2020, 90 per cent of Canada’s electricity should come from sources that do not emit greenhouse gases, and has established programs and regulations to support that objective. Offshore wind power will contribute to meeting that target.

The increased share of renewable energy in the generation mix brings with it additional costs, primarily because of the variable nature of solar and wind generation. This comes at a time when Ontario’s generation and transmission assets are aging and in need of renewal, replacement, and expansion. The move toward a “smart grid” has also required investments in smart meters to date, and will require additional grid-level investment. The overall context for Ontario is one of rising electricity costs. The challenge is to maintain service quality, expand the grid, integrate renewable generation, replace aging assets, and manage the price impacts. These challenges are addressed in Ontario’s Long-Term Energy Plan, released as this report was being finalized.

The Ontario Power Authority (OPA) has the primary responsibility for electricity supply analysis and planning in Ontario. In fulfilling that role, OPA works with all stakeholders, the Ontario Ministry of Energy and Infrastructure, the Independent Electric System Operator (IESO), and the Ontario Energy Board (OEB). Ontario’s current policy is to encourage increasing levels of power generation from renewable energy sources such as hydropower, wind, and solar. The FIT program offers grid access and predetermined prices for renewable electricity, provided that individual projects meet the program requirements, that a FIT contract is executed, and that the necessary transmission capacity can be made available or constructed.

Electricity generation from offshore wind farms is one of the options supported in the FIT program, with a tariff of $0.19 per kilowatt-hour offered. Although the resource potential for the Canadian Great Lakes alone has been estimated at 35,000 megawatts,1 there are currently no offshore wind farms in operation or under construction in North America. In Ontario, several large projects are currently under development, including Wolfe Island Shoals (300 MW) and Trillium (418 MW), making the province a leader in offshore wind in this continent. Further, the offshore wind industry worldwide is focused on oceans, making the Great Lakes one of the first regions for which offshore projects are being developed in non-tidal waters. Offshore wind projects in the Great Lakes face significant challenges because there are no construction or maintenance vessels in the region, there are still only limited port facilities suitable for offshore wind staging and construction, and the supply chain capacity for specialized equipment must be established. Integrating variable electricity supplies from the projects is also an important enabling requirement. This report quantifies the potential economic benefits of Ontario’s offshore wind development based on our best estimate of what the future of offshore wind development might hold.

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Ontario is also facing challenges because its current generation fleet, transmission, and distribution infrastructure are aging and in need of upgrades and extensions. The FIT program, for example, sorts projects into two main categories: those that can be accommodated based on existing infrastructure and those that will require infrastructure expansions. Projects in the former category are reviewed and proceed directly to the FIT contracting stage, while those that require transmission capacity must await the results of regional grid expansion studies.

This report examines wind power in Ontario against the backdrop of rising electricity costs resulting from both infrastructure renewal and integration of renewable generation. Ontario has also taken steps to implement a smart grid by installing smart meters and working toward broad implementation of time-of-use pricing. However, this report’s primary focus is the employment and economic impacts of a developing offshore wind industry.

Given that offshore wind farms don’t currently exist in Ontario, the first step was to assess the potential for the industry to develop. The FIT program guarantees a price and grid access for renewable energy, including offshore wind. The program has been successful in identifying potential projects. Offshore wind projects are typically large and include an internal grid to gather power from the turbines that make up the farm, as well as a transmission cable to an onshore connection with the grid. As a result, they are not expected to require enabler lines—that is, transmission gathering lines—to reach a transformer station for connection. (For smaller or remote projects on land, the cost of a transmission line is prohibitive. However, if a transmission line is built, a number of small projects may be able to share the capacity, enabling them to proceed.) However, offshore wind farms require specialized vessels for construction and for maintenance. The foundations are built using steel monopiles that must be drilled into the lake bed. Alternatively, the foundation can be a gravity base made of concrete or steel that rests on the lake bed. Depending on their location, offshore wind farms may face ice conditions that they must be designed to withstand. The initial construction involves heavy lift cranes that must be able to lift the turbine 100 metres or more to the hub. Ongoing maintenance also requires specialized barges.

Given the specialized equipment and the learning curve facing offshore wind in the Great Lakes, the number of projects that must proceed to establish critical mass for the industry is a key question. This report is based on published information supplemented by interviews with experts in the field. The interviews were conducted in September 2010 with a view to understanding the costs, challenges, and strategies that will enable the offshore wind industry to establish in Ontario. The interviews also contributed to an assessment of the impact of local content rules, as the FIT program requires that 50 per cent of the goods and services for wind projects coming into commercial operation after 2012 be sourced domestically.

For this report, information about offshore wind technologies, costs, and market potential came from a variety of sources, including the FIT program, published studies for European markets, Ontario’s Integrated Power Supply Plan, and company websites. Some information was supplied on a confidential basis by the project sponsor, Vestas Offshore. Interviews with market participants and other stakeholders provided additional information as well as expert responses to a range of key questions.

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The project team developed estimates of the market potential for offshore wind power in Ontario based on the information gathered. The key elements of the market potential are the initial capital cost of each project, ongoing operating and maintenance expenditures, the size of each project, the capacity factor, the timing of each project, and the total number of projects that might be expected to proceed between now and 2026. The market potential analysis resulted in an estimate of the annual construction expenditures, as well as the annual operating and maintenance expenditures that might be made as the industry develops.

The capital expenditures, together with base case and high local content assumptions about domestic content, were allocated across supply chain industries based on estimates of how a typical project might be structured. The resulting estimates of expenditures by industry were input into Statistics Canada’s input-output model of the Canadian economy. The resulting value-added and employment data provided an initial measure of the direct and indirect impacts of the offshore wind industry. To estimate the full employment and economic impacts through time, further simulations were performed using The Conference Board of Canada’s proprietary models. The Conference Board’s long-term economic outlook for Ontario provided the backdrop for the analysis.

This report is structured in the following way: Chapter 2 summarizes Ontario’s move toward renewable energy. Chapter 3 focuses the discussion on offshore wind generation, examining the opportunities and constraints for development and describing the assumptions used in building our long-term capital investment and operations spending profiles. Chapter 4 summarizes the results of the economic impact analysis, looking at the economic benefits and job creation potential of developing the offshore wind industry in Ontario. Chapter 5 provides concluding remarks. A more detailed description of the research methodology and assumptions for the economic impact analysis is provided in Appendix A.

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Economic and Employment Impacts

The following economic impact analysis quantifies the potential economic impact in Ontario of offshore wind development over a long-term horizon. The analysis is based on our best estimate of what the future of offshore wind development holds. Based on our research and interview process, a series of assumptions about the development of proposed and potential offshore wind farm projects was developed and presented in Chapter 3. Although there is uncertainty as to the specific timing of the start-up and completion of these projects, especially those occurring in the latter years of the analysis, the methodology does allow us to draw solid conclusions about the potential impact, size, and growth of this industry over the long-term forecast horizon.

The economic impact analysis is based on assessing the economic benefits of both the construction and operations of the offshore wind sector as it develops over time. To properly assess the impact of construction, it is necessary to understand the potential of the industry to source its inputs locally. Because the wind power industry is not yet well established in Ontario, a good portion of the inputs required will be sourced from outside the province. In particular, development of wind turbines is very equipment intensive—our estimates suggest that in current spending, about 80 per cent of the capital costs will be allotted to machinery and equipment, while the remaining 20 per cent is associated with construction and installation. Moreover, a significant portion of the procurement for developing offshore wind is expected to come from outside Ontario, especially for much of the equipment. However, should development progress as expected, new industries will likely develop in Ontario to service the needs of a growing wind power sector. As a result, two scenarios were developed to account for the potential for increased local sourcing.

The first scenario, or base case local content scenario, is based on the assumption that about 55 per cent of the total development costs will be sourced locally. The second scenario, or high local content scenario, sees this share increased to just over 63 per cent. Overall, the results of our analysis suggest a 300-megawatt offshore project, costing $1.29 billion in today’s dollars, would result in about $711 million of procurement in Ontario under the base case local content scenario. The high local content scenario would see the amount of local procurement increased to $816 million.

To render the investment data compatible with Statistic Canada’s system of economic accounts and our own econometric models, it was necessary to convert the capital investment and operations spending data to inflation-adjusted 2002 dollars. A detailed description of the methodology used to create the spending profiles and convert them to constant 2002 dollars is provided in Appendix A. The results of this exercise are provided in Chart 2, which displays the capital investment and operations spending profile, in inflation-adjusted terms, over the long-term forecast horizon. These data are the main drivers of the economic impact analysis results described next. A more detailed description of the methodology to conduct economic impact analysis is also provided in Appendix A.

The economic impact analysis quantifies the combined direct, indirect, and induced economic impacts on a wide range of economic indicators, including real gross domestic product (GDP), employment, income, and government revenues. The Conference Board’s long-term economic outlook for Ontario provided the backdrop for the analysis. The capital investment and operations spending generated by the development of offshore wind power would stimulate economic activity in Ontario through a spreading out of demand for goods and services. Demand for a specific industry’s products will not only have direct impacts on the economy, but will spread through the economy via a series of multiplier effects. Indirect effects are first felt on demand for goods or services from industries that are direct suppliers. Second-round induced effects, caused largely by increases in employment and profits, produce a widespread impact (albeit usually smaller) on all sectors of the economy. The overall economic multiplier is calculated as the sum of all value-added impacts (direct, indirect, and induced) divided by the initial constant dollar spending attributed to the industry’s investment and operations spending.

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Base Case Local Content Scenario

Overall, a cumulative total of $9.8 billion in real capital investment spending would be generated by the development of Ontario’s offshore wind industry over 2013 to 2026. Additionally, as projects are completed, the impact of operations and maintenance will be felt in the economy. Direct spending on operations is assumed to begin in 2015, rising steadily over the forecast horizon. Still, the sector is capital intensive, suggesting that the sum of operations expenditures will total only $286 million (in real terms) over the forecast horizon.

Table 5 summarizes the findings of the economic impact analysis on a number of key economic indicators for Ontario. According to the provincial model simulations, the capital expenditures and operations of Ontario’s offshore wind industry would result in a significant boost to the province’s real GDP. The impact is dependent on the profile of capital investment spending, which would steadily bolster economic activity, up to a peak boost in real GDP of nearly $600 million in 2026. Combining direct, indirect, and induced effects of the industry, employment would also peak in 2026, with 6,200 jobs (based on person-years—that is, full-time equivalent numbers) added to the economy. Overall, nearly 55,000 person-years of employment would be created over 2013 to 2026, while a cumulative total of $4.8 billion would be added to real GDP. Because of the high import content associated with the capital requirements of offshore wind, the economic multiplier is reduced to 0.48. This simply means that on average, for each $1 of real capital investment and operations spending generated by the offshore wind industry, real GDP in Ontario will be lifted by $0.48.

Table 5 shows that nominal (or current-dollar) GDP will be lifted in line with the change in real GDP. This is because the simulation has only a soft impact on prices. The increase in economic activity and job creation would affect province-wide prices and wages, but these would rise by only 0.03 per cent respectively at their peak in 2026. The increased demand for labour would also lift interprovincial in-migration and the population of labour force age, but only by a fraction of the new jobs created. Moreover, stronger job growth should prompt more Ontarians to enter the labour force, providing an additional boost to the labour force.

Higher labour income and corporate profits will also result in a boost to both federal and provincial government revenues. In current dollar terms, activities generated by the development of offshore wind over 2013 to 2026 would allow the federal and provincial governments to generate a cumulative $1.03 billion in federal and personal income taxes and indirect taxes. Corporate income taxes are not included in the Conference Board’s provincial model but would result in additional revenues for both levels of government.

Table 6 details the real GDP impact on an expenditure basis. The direct impact of the lift to capital investment is first captured under business spending in buildings and structures (non-residential construction) as well as under machinery and equipment investment. However, the economic impact data presented in Table 6 incorporate the indirect and induced economic impacts resulting from the simulation. The strong import content associated with purchases of machinery and equipment would have the effect of lifting imports, a leakage of economic benefits that would reduce the overall impact on GDP and erode the trade balance. Increased job creation and income would help bolster consumer spending, which would also grow over the period examined. Meanwhile, increased interprovincial migration and higher household income would also provide a modest boost to residential construction activity.

Table 7 presents the real GDP and employment impact results on an industry basis. Locally sourced capital investment in machinery and engineering construction suggests that the lion’s share of output gains would accrue to manufacturing and construction sectors. Transportation services would also receive a boost from local, interprovincial, and international procurement of goods. Induced effects, such as the lift to consumer spending generated by increased employment, would be more broadly felt, lifting activity in wholesale and retail trade as well as other goods and services sectors. On a cumulative basis, construction and manufacturing sectors would account for nearly 45 per cent of job gains, while services industries would account for nearly all of the remaining job gains.

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High Local Content Scenario

The high local content scenario is based on the same capital investment projects and costs as developed for the base case scenario. However, as the scenario name suggests, a greater proportion of some investment components would be sourced in Ontario, resulting in lower imports and a larger impact on Ontario’s economy.

Table 8 highlights the results. In this instance, real GDP would be lifted by a cumulative total of $5.6 billion, compared with the $4.8 billion increase in the base case scenario. Peak employment would also occur in 2026, with employment lifted by over 6,700 in that year. On a cumulative basis, roughly 62,200 person-years of employment would be generated—13.6 per cent higher than in the base case scenario, highlighting the importance of leakages due to procurement outside the province.

Overall, the economic multiplier would rise to 0.55, suggesting that under the high local content scenario, for each $1 of real capital investment and operations spending generated by the offshore wind industry, real GDP in Ontario will be lifted by $0.55.

As in the base case scenario, wages and prices would be boosted, but only modestly, by the effects of stronger economic activity. Labour income, profits, and government revenues would also be buoyed to a greater extent than in the base case scenario. Under the high local content scenario, in current-dollar terms, activities generated by the development of offshore wind over 2013 to 2026 would allow the federal and provincial governments to generate a cumulative $1.16 billion in federal and personal income taxes and indirect taxes.

Table 9 details the economic impact results on Ontario’s economy on an expenditure basis. It is important to note that real capital investment is the same in both scenarios; only the share of the capital investment in machinery that is imported is reduced in the high local content scenario. Still, cumulative imports would be only modestly lower than in the base case scenario; while they are first reduced by the greater share of locally sourced capital spending, they are also lifted by the effects of increased economic activity and consumer spending. Other expenditure components generally mirror the impacts observed for the base case scenario. Overall, real GDP in this scenario would be lifted by $660 million at its peak in 2026; this represents a 0.1 per cent increase in the value of underlying real GDP in that year.

As displayed in Table 10, real GDP and employment impacts on an industry basis would be stronger, but generally aligned, with those observed under the base case scenario. However, manufacturing output and employment would benefit from a greater relative increase than other industry sectors when comparing the two scenarios. On a cumulative basis, manufacturing employment would account for 20 per cent of the job gains in the high local content scenario, compared with 17 per cent in the base case.

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The Impact of Operations

While we have seen that the overall economic multiplier associated with the development of Ontario’s offshore wind industry rests between 0.48 and 0.55, the economic impacts associated with the operations and maintenance of offshore wind turbines would be much stronger because the services are rendered locally, largely in wages and salaries. Interim simulations results show that the economic multiplier for operations is close to 1.54. Therefore, on average, for each inflation-adjusted dollar spent on operations, about $1.54 is added to real GDP. While operation expenditures would be overshadowed by the size of capital expenditures in our base case and high local content scenarios, growing installed capacity implies that employment attributed to operations and maintenance will increase over time. (See Chart 3.) Operations employment is permanent, but on a cumulative basis, over the period examined, roughly 4,300 person-years of employment would be created.

The total number of jobs displayed in Chart 3 include those created through direct, indirect, and induced economic impacts, but further analysis suggests that roughly two-thirds would be directly employed in operations and maintenance in the offshore wind industry. Given installed capacity of 2,000 megawatts in 2026, the simulation results imply that roughly 0.19 workers per megawatt would be directly employed in operations and maintenance in that year.

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Comparing Base Case and High Local Content Scenarios

A comparison of the economic impacts generated by our two scenarios helps generate light on how divergent the results of the analysis may be under different assumptions about what portions of capital investment can be sourced in Ontario. We have surmised that the overall economic multiplier rests between 0.48 and 0.55, such that cumulative gains in real GDP could be boosted by roughly $4.8 billion to $5.6 billion under a scenario in which capital investment and operations expenditures total $10.044 billion (in 2002 dollars) over the 2013 to 2026 horizon.

By comparing the real GDP impacts associated with the base case and high local content scenarios, Chart 4 highlights the potential for increased economic activity if increased domestic procurement is achieved. Similar results occur when comparing employment impacts generated by the two scenarios. (See Chart 5.) Cumulatively, the high local content scenario generates about 7,400 more person-years of employment than the base case.

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Conclusion

By identifying a potential future level of development and timing for offshore wind power in Ontario, this report has quantified the required investments and the resulting economic and employment impacts for both the construction period and operations through 2026. Because the industry is at the very early stages of development, the investments and impacts are uncertain. However, some conclusions can be drawn based on the analysis performed.

Ontario has chosen to impose local content requirements for projects that receive FIT contracts. The interviews performed and quantification undertaken suggest that the minimum local content of 50 per cent can be met for offshore wind projects. A local content in excess of 60 per cent may also be achievable. However, specialized components such as the generator, gearbox, cables, and control systems are unlikely to be produced locally. The local content requirements are most likely to be met through construction services, by adapting or expanding existing facilities to produce new components such as blades or towers, and by establishing the capacity to provide marine construction and maintenance facilities. The marine industry will be required to ensure that ships are fitted for specialized tasks and crews properly trained.

A higher level of local content will also result in a larger economic benefit for equivalent installed capacity. However, while efforts to increase local procurement could lift the overall economic impact in Ontario, a balance must be maintained in that local suppliers must have the capacity to meet content requirements without creating market power that results in higher costs, higher prices, and delays due to growing order books. This was a recurring theme in the interviews conducted for the study.

For now, the starting point appears to be reasonable, because market participants are working toward the local content requirement. Monitoring may be required to ensure that there is an appropriate balance between the required local content and the capacity of local supply chains to ensure that prices reflect costs without any element of monopoly rent. There may also be opportunities to broaden the participation of local suppliers in components that will initially be imported because of a lack of capacity.


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The local content rules have also attracted some controversy from nations that believe that WTO trade rules do not permit such rules. In September 2010, Japan requested consultations with Canada through the WTO to address this issue, and the United States and European Union have since joined with Japan.1 The consultations will work toward a determination of whether changes are required to ensure that the FIT program rules comply with Canada’s trade obligations.

The economic and employment impacts of offshore wind will be larger during the construction period than during operations, although the economic multiplier associated with operations and maintenance spending will be much higher. Moreover, the level of ongoing employment from operations and maintenance is important because these jobs are permanent. To the extent that our assumptions about future projects and installed capacity are conservative, the employment impacts are also understated. This is a key issue for further examination as the industry develops. The wind resource would support a much greater level of installed capacity than we have analyzed. The binding constraints appear to be the ability of the transmission grid to receive variable energy such as wind power, and the potential growth path for the supply chain. The supply chain constraint related to vessels is most evident, and will also be a barometer of industry progress and expectations.

The modelling results reflect capital investment and operations spending that totals $10.044 billion (in real terms) over 2013 to 2026. Under the base case scenario, real GDP would be boosted by a cumulative $4.8 billion, while the high local content scenario would see real GDP boosted by $5.6 billion. Similarly, between 55,000 and 62,000 person-years of employment would be generated over 2013 to 2026, depending on how much of the wind farm components are produced locally. Of this, 4,300 person-years of employment are due to operations and maintenance. An offshore wind industry in Ontario that develops enough projects to be sustainable in the longer term will contribute significant employment opportunities in the province. There is considerable upside potential relative to the results cited, but that potential will only be realized as the industry establishes supply and services businesses in Ontario, and as the ability to absorb wind power into the grid expands.